Income protection if you’re self-employed or a contractor
Yes, you can get it. Here’s how insurers assess your income, what they’ll ask for, and what to watch out for.
Last updated
In short
- Self-employed people are exactly who this cover was designed for.
- Insurers use your average earnings over the last 1 to 3 years.
- Limited company directors can usually include salary and dividends.
Why it matters more when you work for yourself
If you’re employed, being off sick means at least Statutory Sick Pay, which is under £125 a week for up to 28 weeks. If you’re self-employed, there is no equivalent. Your income stops the day you stop working, and your fixed costs don’t.
That’s why income protection is one of the few insurance products where self-employed people are the core customer, not an afterthought.
How insurers work out your income
Sole traders are usually assessed on net profit, averaged over the last one to three years of tax returns. Limited company directors can generally include salary plus dividends, and some insurers also count retained profit. Contractors on day rates are typically assessed on annualised earnings, sometimes with an allowance for gaps between contracts.
At claim time the insurer will want to see evidence, so keep your accounts and tax returns tidy. The broker will tell you exactly what each insurer accepts.
Things to check before you sign
Look at the definition of incapacity. “Own occupation” means the policy pays if you can’t do your specific job. “Any occupation” or “suited occupation” definitions are stricter and cheaper, and can leave you uninsured if you could technically do some other work. For most self-employed people, own occupation is worth paying for.
Check whether the policy carries on paying if your business is dormant, and whether it covers you if you change trade. And be honest about your earnings: overstating them won’t increase the payout, because the insurer checks at claim time.